Warren Tea may split assets to end dispute

Kolkata: The sparring promoters of Warren Tea Ltd could, to settle their dispute over control of the company, split its 14 estates and other assets between themselves. Two key shareholders, Anil Kumar Ruia and Vinay Kumar Goenka, have been fighting a legal battle over control of Warren since September. They are related.

By Bloomberg

Warren’s estates, all located in Upper Assam, yield a combined crop of 14.5 million kg a year. Its estates are widely regarded as well maintained and the crop as among the best in Assam. Warren took in Rs 213 crore in revenue and registered a net profit of Rs 20 crore in fiscal 2011.

An agreement sealed in August between the two promoters envisages a vertical split of Warren’s assets. Though it collapsed and the dispute escalated, both parties continue to pursue the possibility of a settlement, according to Subhajit Ghosh, Warren’s managing director. And that settlement can only happen through a split of assets.

“The sooner the better,” he added. Besides tea estates, Warren has invested in hotels. Three hotels in Rajasthan are currently in operation, and one more is under construction.

Ruia’s father G.S. Ruia acquired Warren in 1973 from McLeod Russel India Ltd, currently the world’s biggest tea producer. He handed control of the firm to his son-in-law Goenka in the early 1970s before moving to Manchester to pursue business opportunities in Europe in partnership with the Musrys, who migrated from Mumbai.

For almost three decades, Goenka ran Warren, with “little or no interference” from the Ruias, according to a key company official, who did not wish to be named. Anil Ruia, however, remained Warren’s chairman, until he was “unlawfully ousted” this year, according to his petitions.

In February this year, the Ruias concluded the sale of their business interests in the UK to their partner for two-and-a-half decades and decided to return to India. By then, Anil Ruia’s sons, Akhil Ruia and Ankit Ruia had already moved to India and started working as an investment banker and lawyer, respectively.

The Ruias started taking interest in Warren and realized that it was impossible for them to work together with Goenka and his son, Vivek Goenka, who was appointed executive director this year, according to the aforementioned Warren official, who refused to be named.

So it was decided in August that Vinay Goenka would carve up Warren’s assets into two halves, and the Ruias would get to choose between them, he added. It was also decided that the Warren trademark was to be taken by the Ruias, while the Goenkas would keep the company’s corporate office in Kolkata’s upscale Hungerford Street area.

The Ruias have traditionally held around 42.25% in Warren through a UK-based holding company, Warren Tea Holdings Ltd (WTHL). The Goenka family currently owns at least 41.25%. Till February, the Goenkas held around 30% stake in Warren directly, and the rest indirectly as minority shareholders of WTHL.

In February, the promoter holding in Warren was restructured. WTHL transferred, by way of what is legally known as dividend-in-specie, 11% of the tea producer’s shares to the Goenka family and the rest, around 42.25%, was moved to six trusts controlled by the Ruias.

Warren eventually refused to recognize the transfer of shares to the Ruia-controlled overseas trusts saying that they breached Indian laws, triggering a legal battle. The transfer of shares to the Goenka family wasn’t, however, disputed by the company.

While the two families fought for control of Warren, one Radhe Shyam Saraf acquired 490,652 shares, or a 4.58% stake in the firm, from the market in August. One of the sellers, according to stock market disclosures, was a close relative of Vinay Goenka. Saraf couldn’t be contacted and his intentions remain unknown.

With Saraf coming into the picture, a hostile takeover battle loomed over Warren and some shareholders moved the Company Law Board seeking a freeze on his voting rights. They alleged that he, in partnership with the Ruias, could launch a hostile takeover bid over Warren.

Meanwhile, Ruias received “approaches from potential buyers” for their stake in Warren, according to the unnamed company official cited above. “But they don’t seem to be pursuing such opportunities immediately,” he added.

When contacted, Ankit Ruia, a lawyer and the spokesperson for his family, said, “The matter is currently in courts, and both the Calcutta high court and appeals court felt the need to impose restrictions on Warren’s management to protect the interest of its 12,000-odd shareholders.” He refused to be drawn into the specifics of the dispute.

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